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Microsoft-Yahoo deal would be a blow to Google in Asia

Thu Mar 6, 2008 10:48pm EST
 
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By Mayumi Negishi and Sophie Taylor - Analysis

TOKYO/SHANGHAI (Reuters) - A successful Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) bid for Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz) could slow the growth of their common rival, Google Inc (GOOG.O: Quote, Profile, Research, Stock Buzz), in Asia, where the world's biggest search engine still lags local players.

For Microsoft, whose MSN portal has been struggling to gain share in Asia, the deal worth around $41 billion would open up opportunities to cooperate with top Chinese e-commerce firm Alibaba.com Ltd (1688.HK: Quote, Profile, Research, Stock Buzz) and Japan's top search engine, Yahoo Japan (4689.T: Quote, Profile, Research, Stock Buzz).

Yahoo and Microsoft are at a stand-off after Yahoo's board rejected Microsoft's unsolicited offer of $31 cash or shares, saying it undervalued the company.

If the deal goes through, Microsoft stands to gain a leg up over Google from cooperation with Alibaba's online software and Yahoo Japan's online customer base. Yahoo owns 39 percent of Alibaba.com's parent, and a third of Yahoo Japan.

"If I were Google, I would be looking for acquisitions or more tie-ups in Asia to help secure better market share," said Hiroshi Naya, analyst at Tokyo-based Ichiyoshi Research Institute.

In Japan, Google is outnumbered nearly three-to-two in users by Yahoo Japan, according to Nielsen Online, and it comes a distant second to Baidu.com Inc's (BIDU.O: Quote, Profile, Research, Stock Buzz) near two-thirds share of the search market in China.

Analysts say the big "if" for a merged Microsoft-Yahoo hoping to keep Google from the No.1 spot will be whether Microsoft can learn from Yahoo and adapt to local markets with their language and cultural barriers, to expand the merged company in Asia.

YAHOO'S EDGE  Continued...

 
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